MR Microinsurance_2012_03_29.indd - International Labour ...

10 Funeral insurance
Christine Hougaard and Doubell Chamberlain
The authors wish to thank the following persons for their useful feedback and suggestions: Jeremy Leach
(Hollard Insurance), Richard Leftley (MicroEnsure), Michael J. McCord (MicroInsurance Centre),
Marc Nabeth (CGSI Consulting), Rob Rusconi (Tres Consulting) and John Wipf (actuarial consultant).
This chapter considers the current and potential role and value of funeral insurance
for low-income consumers based on evidence from selected countries. Despite the
different experiences across countries, the following important themes emerge:
1. Funerals and related expenses are often prominent in the minds of lowincome
households and, accordingly, many households place high priority on
finding ways to deal with funeral expenses and are willing to dedicate part of the
household income to funeral cover.
2. There is a strong link between funeral insurance and the underlying service,
namely the funeral. This link to a tangible service is an important driver of
demand as well as, in some cases, of the choice of distribution channel used.
3. Funeral insurance is provided in both formal and informal markets. In some
instances, funeral parlours self-insure – that is, informally act as insurers. Informal
funeral insurance also occurs where groups of people pool funds to help cope
with funeral expenses. Funeral insurance is an important product in some formal
markets and is at the forefront of many commercial insurers’ drive to reach down
the income spectrum. As such, it has been one of the focus areas for alternative
distribution innovation.
4. Funeral insurers are challenged to deliver better value to customers. As section
10.3.1 indicates, the combination of strong demand for funeral cover and the close
association with funeral services may lead to consumer vulnerability. A number of
trends are, however, starting to emerge to counter abuse and provide enhanced value.
The sections below consider these themes in more detail.
10.1 Funeral cover matters
Funeral insurance is a term life insurance policy where the benefit is used to
cover funeral expenses. The benefit can be in the form of a funeral service, a cash
benefit that can be used to help pay for a funeral, or a combination of the two.
Outside credit life insurance (see Chapter 9), funeral insurance is the most prevalent
form of microinsurance in a number of countries (see Box 10.1).
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